Our Views: Amendments, Nos. 2, 3, and 4, We support these changes

Read the headlines these days, and it’s easy to see the grim consequences of lax fiscal discipline in government. National governments in Italy and Greece are facing stark consequences from budget imbalances, and problems with the federal budget here at home have been complicated by unwise fiscal policies advanced by both major political parties.

Such challenges underscore the need for Louisiana’s state government to keep its fiscal house in order. Three amendments to the state constitution on the Oct. 22 ballot — proposed Constitutional Amendments Nos. 2, 3 and 4 — are being promoted as sensible measures to help advance sound budget policies at the State Capitol.

We endorse all three amendments.

Proposed Amendment No. 2: Retirement debt.

Proposed Constitutional Amendment No. 2 would require that at least 5 percent of state government’s nonrecurring revenue be used to pay the huge unfunded liability for four retirement systems for teachers and state employees. After the first two years of the amendment’s implementation, the amendment would require that at least 10 percent of state government’s nonrecurring revenue be used to pay this unfunded liability.

The retirement systems involved in this amendment collectively represent a huge unfunded financial burden for the state. In other words, the assets of the systems are much less than the financial obligations these systems are facing as employees retire. The unfunded liability totaled more than $18 billion in 2010.

Politically, it’s much easier for governors and lawmakers to spend money on other things instead of addressing this unfunded liability. But the liability is like a huge credit card bill that, if ignored, will only grow worse with time — a financial time bomb for future state budgets.

We are generally skeptical about mandating state spending decisions through constitutional amendment. In general, governors and lawmakers need flexibility to adjust spending priorities as circumstances change. But proposed Constitutional Amendment No. 2 would require only modest payments toward this unfunded liability. In fact, critics of the amendment have argued that its requirements for paying down the unfunded liability aren’t ambitious enough. We’d encourage the governor and lawmakers to look at the payment requirements stipulated in the amendment as a starting point, not a final destination.

Proposed Amendment No. 3: Patient Fund

Proposed Constitutional Amendment No. 3 is aimed at protecting the Patient’s Compensation Fund from raids by lawmakers to pay for other things. The Patient’s Compensation Fund was established by the Legislature to provide payments of medical malpractice claims awarded by a court through a settlement between the parties. The intent of the fund is to make medical malpractice insurance more affordable for various providers. The revenue in the fund comes from surcharges paid by health-care providers who participate, and by statute, the revenue is considered private money. Proposed Constitutional Amendment No. 3 would clarify state law, essentially preventing the fund from being used as a piggy bank for other state spending.

Proposed Amendment 4: Rainy-Day Fund

Proposed Constitutional Amendment No. 4 would allow the Legislature greater flexibility in tapping into the state’s Budget Stabilization Fund, commonly known as the rainy-day fund, during difficult budget years. One of the purposes of the fund is to act as an emergency savings account for lean budget times. But certain provisions in the existing law mean that in many years, the Legislature must repay the fund almost as soon as money is withdrawn. This essentially defeats the purpose of the fund as an emergency source of revenue, putting vital state services such as public health care and higher education in jeopardy.

Proposed Constitutional Amendment No. 4 would allow a longer period for repaying the fund. Even with the amendment, restrictions still would be in place to protect the fund from being overused.

We urge voters to support Proposed Constitutional Amendments Nos. 2, 3 and 4.